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Fixing the IMF and the World Bank

CAMBRIDGE: As usual, the IMF and World Bank congratulated themselves at their annual meeting in Washington, just concluded. Beneath the self-congratulation, however, was the widespread feeling that both institutions are failing badly, and need fundamental reform.

Some reforms – if only partial – are already in sight. Poor countries received a commitment for much deeper debt cancellation. President Clinton, indeed, announced 100% cancellation of debts owed to the U.S. by the poorest countries. The IMF also promised it would care more about poverty (!). And rich countries agreed to meet more regularly with the poorer countries in a new group called the G-20: which includes eight rich countries, ten developing countries (mainly the big ones, such as Brazil, China, India, and South Africa), plus a representative of the IMF/World Bank and one from the European Union.

The main order of business of the G-20, which will meet at the level of finance ministers in Berlin in December, should be the fundamental repair of international institutions. Most of these institutions are doing the wrong job, and all of them need fixing.

Take the IMF. It mangled and mishandled Russia very badly. It has performed poorly in Africa for twenty years (admitted, in effect, by its "new" willingness to focus on poverty). It failed to stop financial crises in world markets, which have been worse than ever in the past three years.